Malaysia inflation surges to highest in more than 8 years

A woman shopping in a wet market in Kuala Lumpur, Malaysia, on Feb 18, 2016.
A woman shopping in a wet market in Kuala Lumpur, Malaysia, on Feb 18, 2016. PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - Consumer prices in Malaysia rose at the fastest pace in more than eight years in February, adding to the central bank's policy dilemma as it tries to keep interest rates low to support the economy.

The consumer price index (CPI) rose 4.5 per cent in February from a year ago, exceeding the median estimate of 3.9 per cent in a Bloomberg survey of 23 economists and the highest forecast of 4.3 per cent.

Prices rose 1.3 per cent from the previous month.

Inflation has spiked in recent months due to higher fuel prices, adding pressure on the central bank to raise interest rates.

Bank Negara Malaysia said on Thursday that inflation will probably average 3 per cent to 4 per cent this year, up from 2.1 per cent in 2016, adding that 2017 will be another challenging one for monetary policy. The bank has left its benchmark rate unchanged at 3 per cent since a surprise cut in July.

Transport costs surged 17.9 per cent in February from a year ago, after increasing 8.3 per cent in the previous month. Food prices, which make up 30 per cent of the CPI basket, rose 4.3 per cent from a year ago.